A short summary of Shiny's thoughts, non-exhaustive.
1. Shiny worked in an investment bank, as an FX Options market-maker for nearly 10 years & a qaunt for 2 years before that. He then moved to California to work in a software firm. He is from Australia.
2. Investing for the Long Term, for small investors.
- Put your money in a mix of Low-Cost Stock & Bond ETFs.
- For Sg investors, that's ES3 & A35 respectively.
- Make the % equals to "110 minus your age" in stocks & the rest in bonds.
( example, age 40 yrs old. 110-40 = 70. 70% in stocks, 30% in bonds ).
- Once a year, at the same time every year, rebalance your money. Buy & Sell to bring your stocks & bonds to that "110 minus your age" proportion.
- Go to pub, pole-dance bar, KTV flower joint, whichever rocks your boat.
Why trust Shiny ?
He runs a consulting biz on the side, giving hedging & investment advice to large investors & corporations who need independent advice. & so far, he is kind enough to spend the time with us, on hwz, where he is very much like a guiding light to alot of peeps, including me.
3. Lump Sum / Monthly Investment ( Dollar Cost Averaging through a consistent time period, i.e. monthly )
- If what you have is a stream of cash, coming in monthly, you can invest just that, every month. that's called "dollar-cost averaging".
You don't try to time your investment, as you just invest the same amount every month, regularly.
- If you have a lump sum to invest, then the best thing to do is To Just Dump it All In At Once / In 03 Portions.
If you are worried about buying high and having buyers' remorse. The easiest way is to split your lump sum into 03 parts, invest 1 part each month, until you are fully invested. That way, if the stock goes up, at least you've bought some, if the stock goes down, you still got some ammo to buy some more at lower prices.
* Shiny does not believe in making many trading transactions per month, as that would amount to a high trading fee. After all, the brokerage firms don't care whether we win, lose or draw. They just want to earn our transaction fees.
* Shiny does not provide stock-pick consultations too, as he prefers ETFs to stock-picks, which is easier.
4. Why Investing in Gold is almost a No-Go ?
- Gold is an entirely unproductive asset. It doesn't provide dividends yields. & if it doesn't deliver capital gains, then it's just sitting in your portfolio depreciating.
- Investing in Gold is akin to Shorting Interest Rates.
Gold, Cash & Long Bonds are all direct / indirect bets that interest rates are going down.
In an environment of rising interest rates ( applicable at time of writing, Aug 2015 ), such a portfolio will dramatically underperform.
- Over the long term, gold matches inflation, it doesn't outperform it. Stocks are a better inflation hedge.
- Over the very long term, gold returns 0% inflation-adjusted, but stocks return 5-7% inflation-adjusted.
- Shiny would consider buying gold @ US$500-600 an ounce.
- Shiny thinks a gold investment that is 2-5% of your portfolio is fine.
- Gold is not money. The gold standard ( & currency pegs in general ) makes it impossible to run a country, that's why everyone gave up on it. It basically amounts to tying your inflation rate & your monetary policy to how much gold miners can dig up. No serious economy is going to return to a gold standard - & even if they did, they wouldn't peg it at $10,000 an ounce & deliver an instant windfall to a bunch of hilly billies whose houses are packed with guns & canned goods.
Gold prices in the medium term ( years, not decades ) respond to the level of real interest rates, taking(?) the difference between inflation and short-term interest rates. Inflation goes up, gold goes up. Short-term interest rates goes up, gold goes down. Short-term interest rates are headed up over the next few years ( time of writing, 2015 ) & that's going to send inflation down, so gold gets whacked from both sides, i.e. short-term interest rates & inflation rising.
If you are going long on gold here, you have to think that the FED is not going to hike for multiple years and they are going to let inflation run rampant. You are basically shorting the FED. ( This is not an entirely stupid view, but FED has to hike the interest rates eventually )
*** If you think that's going to happen, then go buy some Dec 2016 Euro-Dollar calls. If you are right, you will make enough money to retire.
5. Investment Time Horizon.
The general rule of thumb is
- if you need the money within 2 years or so, it should be in cash.
- if you need the money within 5 years, it should be in cash / bonds.
- if you don't need the money within 5 years, it can go into stocks, or ( even better ) the 110-minus-your-age stock / bonds mix.
- Shiny's time horizon can span towards decades. So he can be considered as a value investor, like Warren Buffet, but one that invests in Stocks ETFs & Bonds, than single stock-picks.
6. Shiny's thoughts on 4/12/2014.
American Economy is in a good shape, good enough for FEDs to hike interest rates in 2015. Employment is growing, inflation is low and stable.
Europe & Japan are less healthy.
Emerging markets are going to have a rough time over the next few years as the USD strengthens, their own currencies weaken, and hot money flows from emergings back to developed markets.
He is very optimistic about America over the next 5-10 years.
7. About ETFs.
- Shiny subscribes to ETFs for Stocks & Bonds only.
The ETFs that he points us to buy, are those that actually holds the stocks / bonds that they claim, so that in events of distress, say, Great Financial Crisis, etc, the ETF would not vanish into thin air.
Apparently, there's many types of ETFs...
Leveraged ETFs, Inverse ETFs ( Short ETFs ), Futures-Based ETFs... all have their own problems.
They are completely inappropriate as trading vehicles for holding periods longer than a day or so.
ETFs are absolutely the way to go for long-term buy-&-hold investing in stocks & bonds.
If u are going to trade FX / Commodities, you are better off using futures.
If you are going to trade volatility, you are better off just trading options.
* He does not think FX / Commodities / Volatility are appropriate asset classes for retail investors.
8. About investing in Japan.
Japanese bonds & stocks have been going up in price, nearly as fast as yen's been going down.
Don't buy Japanese real estate. Rental Yields : pretty phat, about 5%. But house prices dropping by 5% every year as well.
Japan's demographics : it's population is decreasing, as the population is rapidly aging... world's fasting, low birth-rate. Plus the country's xenophobic fear of immigrants.
9. About people selling "get rich quick" courses.
There's no shortcut to getting rich. Period.
10. Any preference to a specific date for re-balancing one's portfolio yearly?
Doing it at the end of December is a bit silly, because that's when liquidity is at it's absolute worst.
"Markets are seasonal" sounds like witchcraft, but there does appear to be a bit of seasonality in the US markets.
The old "Sell in May & Go Away" doesn't have much validity, but re-balancing in November, after the end of the May-October seasonal weak pretty, is a pretty good idea if you want to have a slightly better chance of capturing the turning points in the markets.
If you are re-balancing once a year, I would pick November.
If you are doing it twice a year, May & November ( 6 months apart ) is a good idea.
11. Which Platforms to use?
For non-Singapore stocks, use IB*.
For Singapore stocks, use Stanchart.
- If your broker charges u for custodian or dividend handling fees, they are ripping you off & you should go somewhere else.
Stanchart for retail investors keen on sg stocks.
Retail investors : for people, like us, not institutional investors, aka the smart money.
Stanchart is not going to fail. But if Stanchart did fail, your stocks would be ringfenced, and you'd get them back in full.
BUT with Stanchart, you do not get voting rights over your stocks, if I recall correctly.
IB* : Interactive Brokers.
-Don't bother with IB until you have got a decent-sized account.
The $3 or $10/month fees will eat away at your money.
-fund the account in SGD; convert it to USD at spot; and then you pay $1 per trade to execute. That'll be cheaper than anything Ameritrade/POEMS can offer.
-Use IB, if you trade often, to meet their activity requirements.
- if u don't have that many trades to justify the monthly fees, you may want to consider TD Ameritrade Asia.
* thinkorswim has been replaced by TD Ameritrade Asia, as of 11 Aug 2015.
12. Which ETFs to choose?
Stick to Vanguard & iShares. Ignore everything else.
Because they are ETFs that really hold the stocks that they target to be vested in.
13. On Insurance.
- Get a Hospital Insurance ( a Shield Plan )
- Get Term Life Insurance to Age 65, if you have dependents to support ( wife / kids )
- Never buy any other insurance plans. No ILPs, No Endowments. Just don't.
ILP : Investment-linked Products.
- Shiny does not subscribe to CI, Early CI.
CI : Critical Illness... a list of standard 30(?) items, such as cancer, etc, which enables an early (for Early CI ) / additional payout.
Generally, it's a VERY BAD IDEA TO COMBINE protection with investments. Insurance agents push for ILPs, as it gives them the higher commission, compared to other insurances. Term Life Insurance gives them very low commission, that's why they would swing you to buy Life Insurance, which again, gives them very high commissions.
14. The best time to start investing... is always right now.
ONE : ( as of Aug 2015 ) US economy is strengthening, the Fed is getting ready to raise interest rates, which they don't do, if the economy is weak.
TWO : If the crash does come, you are probably not going to be brave enough to buy.
THREE : Even if you buy now, you don't have to buy 100% stocks. Use the 110-Minus-Your-Age Strategy.
15. on being Dividends-Centric
Dividends whoring is a dangerous business. Generally, you buy stocks for capital gains, not for their dividends. If you want income, buy bonds.
DOWNTOWN JOSH BROWN
"One of the most dangerous things an investor can do to a portfolio is to seek bond-like returns from the stock market, while taking de facto equity risk on the fixed income side. In English - to turn their bonds into stocks & their stocks into bonds.
Buy high-yielding dividend stocks for their current income and pretending they are "bond-like" is a recipe for nasty surprises at some point down the line. But this is precisely what many in the industry have been doing - Financial advisors, ETF providers, money managers - everyone's playing.
16. Diversify
Hold a diversified assets in different countries.
17. ETF
ETF : Exchange traded fund, basically tracks / holds a bunch of something.
ES3 is an ETF the tracks 30 sg-based companies, i.e. DBS, OCBC, SingTel, Keppel, etc.
It's safer than buying 1 company and rises with the economy.
During a crisis, you can be sure this ETF won't disappear, can't say the same about any single company.
A35 is a bond ETF, it holds many bonds to maturity. One can treat it like a bond. It's stable and yields about 2%.
ES3 and A35 are stock code.
Their name is STI ETF and ABF SG BOND ETF.
You can buy / sell them on the stock market.
18. Peeps Shiny follows on Twitter...
@Reformed Broker - Josh Brown, a wealth manager who tells it as it is.
@DSquareDigest - Dan Davies, a former banking analyst with interesting industry perspectives.
@Matt_Levine - Matt Levine, the best financial journalist working the beat anywhere in the world
@FTAlphaville - Twitter account of Financial Times' excellent Alphaville blog
@FastFT - something good as well
19. the most basic books about investing.
- millionaire teacher
- the coffeehouse investor
This is from the member, "The Accountant", if I recall correctly.
20. on SG Reits ( Aug 2015 )
If you buy a bunch of REITs, you're explicitly making a bet on real estate prices - they're nothing to do with the STI really.
The STI is mostly banks, real estate companies (not REITs, the companies like Capland that run the REITs) and Singtel.
REITs are a tiny tiny slice of the index, like 3.5% of it.
I will update and summarise concepts that I understand, as much as I can.
I am a noob, so please do your own due diligence.
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Please feel free to add on to the list.
I hope this summary has been useful.
I only summarised to things / terms / concepts that I understand.
So there would be alot of concepts out there that I may have left out, please do not flame me...
Everything is time-sensitive, what applies now, may not apply in whatever time you read this, in the future. As much as I can, I would denote a time of writing, if I deem the information time-sensitive, so that when we look back at this thread at 2021... it wouldn't seem ludicrous, as it would have been timeline-qualified.
I am just a newbie... trying to learn and be useful to the community here, in my own ways... I hope.
